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A Japanese VC’s take on Funding, IPO Pathways and Exits in India (Nao Murakami)
28 Plays10 months ago
How did a Japanese investment banker turn into one of India’s most influential seed stage venture capitalists? In this episode of the Founder Thesis Podcast, Nao Murakami, Founder and General Partner of Incubate Fund Asia, shares his journey from Nomura to building one of the most active seed VC funds in India and Southeast Asia.
Nao recounts his move from Tokyo and New York to Delhi, the failure of his first startup, and the serendipitous meeting that led to launching Incubate Fund Asia. From backing early bets like ShopKirana, Captain Fresh, and Yulu to now co-running a 200 million dollar fintech growth fund with SMBC, Nao brings unique insights from Japan’s profitability-first culture to India’s dream-big ecosystem. In this candid conversation with Akshay Datt, he unpacks founder quality as the ultimate success factor, Japan-India cross border synergies, and the evolving exit landscape in Indian startups. This episode is a must-listen for founders, investors, and operators curious about the future of early stage venture capital in India.
Key highlights:
- How Nao Murakami transitioned from Nomura to founding Incubate Fund Asia
- Lessons from investing in ShopKirana, Captain Fresh, Yulu and Plum
- Insights on founder quality as the biggest driver of success in India
- How Japanese LPs and corporates are entering India through venture funds
- The changing Indian startup exit story from 2016 to today
- Sectors where Incubate Fund Asia is placing bold bets in 2025
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00:00 - Nao Murakami’s journey from Nomura to VC
02:20 - Launching Incubate Fund Asia in India
06:10 - Seed fund strategy and portfolio highlights
12:00 - Japanese vs Indian startup mindset
18:15 - Betting early on ShopKirana, Yulu and Captain Fresh
25:00 - Why founder quality drives success in India
31:20 - LPs from Japan entering Indian startup ecosystem
37:50 - The evolving exit landscape for Indian startups
44:40 - New bets in fintech, D2C, deeptech and greentech
51:10 - Nao’s advice for Indian founders looking at Japan
#NaoMurakami #IncubateFundAsia #FounderThesisPodcast #IndiaStartupEcosystem #SeedStageVC #VentureCapitalIndia #CaptainFresh #Yulu #ShopKirana #PlumInsurance #JapaneseVC #FintechIndia #FundingWinter #StartupExitsIndia #B2BCommerceIndia #EarlyStageInvesting #SMBCAsiaRisingFund #DeeptechIndia #EVStartupsIndia #D2CIndia
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Transcript
Murakami's Career Journey
00:00:00
Speaker
Hi, I am now Murakami from Incubate Fundasia.
00:00:18
Speaker
So now, son, give me like a broad, ah like how did you become a venture capitalist? Just take me through that journey of becoming a VC. OK, OK. It's a little long story, so I try to make it very short. But the I used to be an investment banker at Nomura in Japan and also in the US, covering all the startups, especially tech and internet startups ah in Japan and in the US. And you grew up in Japan. like You're from Tokyo.
00:00:51
Speaker
I'm from Nia, Tokyo, actually Kamakura. I grew up in Japan, but I got the higher education, technical university education in the U.S.
Transition to Venture Capitalism
00:01:01
Speaker
And I joined Nomura. And then I had been a banker for seven, eight years there, mainly covering startups. But somehow when I was in New York, working in Nomura. So what does that mean? Like you were helping startups to raise funds?
00:01:17
Speaker
Yeah, these funds and also doing the supporting the IPOs and all of these things. Okay. Okay. Japanese startups. Japanese startup when I was in Japan and then also when I shifted to US, obviously US companies basically. Okay. Okay. Yeah.
00:01:35
Speaker
And while I was in us the U.S., I just got technical bored of the investment bank carriers. And then also many things happened internally in the middle also. And then I just decided to quit, basically. right And then the my initial plan was traveling around the world with my wife. By there at the time I was newly married. So, okay, let's see what's going on in the world and let's decide something to do.
00:02:01
Speaker
and But when just after I resigned from Nomura, the one of my best friends from my college in the US just called me.
Startup Challenges in India
00:02:09
Speaker
He's actually Japanese, but he is also a startup guy in Japan. And he just called me. He has so many clients all over Asia. So he was traveling around Asia, including India, almost every month. And he just called me. like something's going on in India. And then I feel India will be our next big thing. So he just feeling like, I don't want to do this small business in Japan. I just shut the shop, moved to India, starting something new. So he asked me, why don't you join? Okay. It was a light timing. I just quit Nomura. And then I was just thinking to traveling around the world. So, and it might be interesting to go to India and starting something new together. So I just joined his journey basically.
00:02:53
Speaker
So then I moved to India in 2014. Actually, I started this company together with him, based in Delhi. Learned the company for two years. It failed, but we learned a lot of things. And then the actual product you were trying to build? It's very similar to, let's say, an urban company, at the time, an urban club, or the the house joy type of this service commerce, connecting the professionals to users over the internet, right? OK.
00:03:23
Speaker
And yeah as an expert, obviously, I was feeling personally the frustration rate of the booking diplomas, electricians, and these stuff in India. So, OK, it might be an interesting interesting opportunity. And we started that. And it actually became profitable. And the also, learning good. But at the same time, like the avant-garde.
00:03:40
Speaker
and came into the market, Housier came into the market. 2014-2015, as you may know, like it's obviously ah one the first wave of the startup bubble,
Founding Incubate Fund Asia
00:03:49
Speaker
let's say. So, most of the competitors are raising a big amount of money at the seed stage, using all the money for the marketing, discounting all of these things. So, we're already profitable about running a very small company, and then we start thinking, what should we do next? I mean, just run the SME.
00:04:04
Speaker
or do the same thing, laze all the money and fighting against the other competitors or do something else including shut the shop and go back to Japan. And I started thinking about all of these things. And then I went back to Japan for my friend's wedding. And then Incubate found Japan's founding partner, Akawurasan. He just called me. And then the he asked me to come to the one small Izakaya type of set-up in Tokyo. And then I didn't meet him before, actually. But he somehow found me. And he just called me. Please come here.
00:04:39
Speaker
And then over the drink, we discussed only 45 minutes, actually. But he said, said actually we decided to set up the fund in India. And then we are looking for someone to take care. So why don't you set up the fund together?
00:04:53
Speaker
And this Incubate Fund India, now it's called Incubate Fund Asia. The story just started in 2016. This is a very long story making show. yeah This is how old Incubate Fund is. So Incubate Fund is how old in Japan? What is the history of the fund?
00:05:11
Speaker
Now it's 12 years old fund and then the as a seed independent seed venture capital fund. We are the one of the oldest ah in Japan and also the largest now. We manage over 1.2 billion US s dollars. it's As a seed fund it's quite a big ah U.M. and we land six funds already in Japan. So we are very prominent and well-known fund in Japan but obviously at the time no one knows about incubate in in Asia basically. So yeah, we started. So i our first fund is technically my GP commitment and then the their token money came in and we started very small 3 million dollar fund for India and then we tested the market and it went well. So we decided to raise is the second fund and we just closed the south fund also recently. So this is how we emerged in India. india yeah What was the size of fund 1, fund 2 and fund 3?
00:06:08
Speaker
fund one was about 3 million. It was a JPY fund so it's obviously how the JPY depreciates its effect but yeah it's about 3 million and then the second fund is about 20 and the third fund we recently closed which is 30 and then the OUSD and also last year we launched 200 million fintech growth stage focus fund together with SMBC, which is the okay one of the largest financial institutions in Japan. So seed fund, sector agnostic seed fund, we have like three funds now currently active on this 30 million dollar fund.
Contrasting Startup Ecosystems
00:06:46
Speaker
And then for the growth stage fintech, we together with SMBC, we are running the 200 million dollar fund. Yeah. Okay. oh Japan,
00:06:57
Speaker
does not have that vibrant ah startup ecosystem as, for example, US or India or even China. right ah What is the reason for that? Yes and no. i mean Yeah, I mean, in terms of the numbers of the unicorns or the funding amount and all of these things, obviously, Japan is much smaller than the markets, as you mentioned, like the US, China, India, let's say. But at the same time, they're a good investor and then the the startup community there. And then the good point is the Japanese IPO market is very much wide open for the early stage startups also. So almost every year, like the 50 to 100 of the startups are doing IPO in Japan.
00:07:41
Speaker
and even 100 million dollar operation company can do do IPO. So okay it that's actually one of the reasons why the number of the unicorns is less in Japan because the before becoming a unicorn, the company going in public. So technically one of the reasons. So we cannot say that Japan doesn't have a vibrant startup ecosystem, by the way. But yes, I mean, in terms of the market size, funding amount, everything, obviously India, China, US is much larger.
00:08:06
Speaker
And the one of the fundamental reasons, I feel, I think there's two reasons. One is the Japanese market is very unique in nature compared to other markets, other global markets. And then this local market itself is sufficiently big enough.
00:08:23
Speaker
Right. Still, we are the, I think, false religious economy in the world. And and it's a very unique market. That's why the foreign competitors are very difficult to crack the market. So it's subject to the big market. It's technically guard laid by the nature. So the no foreign companies are playing around.
00:08:41
Speaker
So homegrown startups can grow fast, and but they are not going global actually also. So in this sense, the the small to medium-sized successful startups, um so many such startups are emerging from the Japanese market. but that day ah technically only staying in Japan. So they're kind of like difficult to expand globally. So it's in return the market it's kind of limited and then small. This is the first reason I feel. And second reason it's also related to this but the as you also feel and maybe but the one is language barriers. The most of the Japanese startup founders cannot speak English.
00:09:22
Speaker
Now it's changing, ah but they still, let's say like maybe 70, 80% of the founders cannot speak any English at all. And then it's very difficult to attract foreign money one, and they also it's very difficult to expand globally also. right So in the sense, like I think these two reasons are fundamentally ah kind of like blocking the Japanese startup to to be very big actually. yeah okay So what you're saying is ah Japan is such a unique market that Success in Japan does not mean that you will get success outside Japan because success in ja Japan needs a different set of factors.
00:10:00
Speaker
That's, I think, one thing. And then, let's say, if the founders are from Southeast Asian countries or even maybe South Korea, the yeah mother market itself, the whole market itself is technically small, right? So they can create the sufficiently big know business there. But the Japanese economy itself is it's not biggest in the world, but the sufficiently big enough to make this startup to be, let's say, medium-sized success to make. So then the founder's mindset, OK, why should we go to Grover from day one?
00:10:29
Speaker
So okay yeah, I think they specialize into Japanese market, all the products, everything. Then once they realize, okay, we have to go to Grover. It's very difficult to to change because everything is accustomed into specially designed to Japanese markets.
Investment Strategies and Growth
00:10:47
Speaker
So yeah. Right. Right. Right. Right. Okay. Okay. ah You've seen startups in Japan, US and now India. How do yeah startups in India What is like unique about Indian startups as compared to US or Japan?
00:11:03
Speaker
Yeah. ah Maybe like the I'm deeper in Japanese market than Indian market. So maybe I'm going to compare between Japan and India. And then the it's in my point of view, it's very much opposite. Let's say like the Indian founders or the startups are very good at the dreaming big, making a very bold move, creating a big growth and then the It's obvious that the market is very big and then the 1.4 billion population, so it's very good on the growth and then also dreaming big and then the picturing big things. um On the other hand, like Japanese founders and the startups, even the VC ecosystem is very much keen to make the company to be profitable and sustainable, even from day one.
00:11:51
Speaker
Uh, this is also in the town of that the IPO market is very wide open for the artists to start up. So the once the company becoming profitable, uh, the IPOs the door will be open. So why not? ah So the it means the we're very.
00:12:07
Speaker
how can I say, the bottom line driven approach we take. So this company, when they can be profitable, and then also we're tweaking into the very details of the marketing budget, everything, everything. So we are very detailing out in terms of the order numbers, especially for the cost side. And then India side, even sometimes I feel like this part is sometimes weak, but at the same time, okay, let's grow this much, expand into 10 cities. And then all of these things, this dreaming big type of the part is India's very, very good. And then I hope the Japanese founders also have such a very big growth mindset also. So I mean pros and cons, but we are a Japan origin investor investing in India. So I think we can mix these two perspectives in and then be making the company to be successful, basically. Your LPs who are putting the money in into the fund are basically Japanese ah family offices.
00:13:02
Speaker
The first two funds are 90% of the rupees actually from Japan and the mostly corporates actually corporates plus some family offices. So corporates who want to do something in India, who want to collaborate with India and startups and these guys.
00:13:18
Speaker
and then some family offices who have an interest in the market. But the the recently closed third fund, ah we invited more international rupees. So now we have rupees from Singapore, from South Korea and other regions and the both corporates financial insurance and also family offices. So now we are trying to diversify our LP base and I feel the the In the future, ah the majority of the LP base is not from Japan. And then we we will attract more global money into our funds. Okay, interesting. So what does a Japanese LP look for? Now, like you said that the Japanese mindset is profitability first, which in Indian startups is not there. So what what are they looking for when they put money for investing in Indian startups?
00:14:10
Speaker
Right. As I mentioned, like and the less the majority of our LPs, for our fundline Fund One and Fund Two, are the Japanese corporates, like large corporates ah from Japan. So what they are looking for is, let's say something is going on in India, and then the economy is growing. So they want to penetrate the Indian market somehow.
00:14:34
Speaker
But the by themselves, it's very difficult. And then the investing in indirectly through our fund into Indian startups. And then they want to, first of all, they want to get access to the information and what's going on in India from these startup viewpoints is one. And then secondly, if some interesting opportunity there, they want to collaborate with them to make the business together.
00:14:58
Speaker
So, these two perspectives have been very strong from our LPs. So, actually, like for Fund1, Fund2 portfolios, I think 40% each of the portfolios actually received the subsequent funding from our LPs, actually. So, this is a very strong interest from the LPs side. And then, actually, some companies actually started the business together also. So, this interest is
Network Building in India
00:15:21
Speaker
very strong.
00:15:21
Speaker
Yeah, family office is obviously, India is growing, economic economy is growing, so we want to make money from India. So I mean, and basically these two two perspectives. okay Okay, interesting. ah Who are some of the corporate LP's who have further done business? with we yeah Actually, we didn't get the permission from them to disclose, but there are some trading companies, ah and then the obviously some financial institutions, and the also a capital gaming company, and the also the HR among the recruitment type of agencies, type of companies.
00:16:02
Speaker
okay guard it but okay So tell me about the journey of investing in India. What was the first bet that you took? And how has that bet turned out? And what are some highlights of but like you know interesting companies that you have backed?
00:16:18
Speaker
Yeah, I am. So it was, I mean, first of all, my journey in India have been very fun. And then I enjoy, I have been enjoying a lot. And then the and then I made a lot of friends in ecosystem and also south outside of ecosystem in India. So I have been enjoying a lot in investing in India.
00:16:39
Speaker
Then the first bed from our fund in India was actually a shop, Kirana, which they do the B2B commerce, B2B supply chain for Kiranas basically. So they're dealing with FMCZ products and some food also. And we wrote the first VC check in them. And then since then, they got the funding from InfoEdge, OMA India, Sixth Sense and others, and then they have been growing well. So yeah, I mean,
00:17:07
Speaker
It was a ah good journey with them. And then our first bet is doing well. So it's actually a good sign for us to be doubling down in India. So it was a good success in our case. And then actually, the before we invested in Shopkirana, I couldn't pass any deal for six months okay i mean at the IC. I think I brought maybe 30, 40 deals into the ICs, but we couldn't pass the deal at the The reason is the IC members select the fastest investment in any regions or the any new funds will be very important because if many people will judge from there. So, their bar for the fastest investment is very, very high. So, I was feeling like, okay, six months I couldn't pass any deals that I see, so am I a good investor or not? But I mean, but iing in the end, they they're okay with this investment in Shokirana and then they're doing well. So, yeah, I mean, the journey was so far, it's good.
00:18:04
Speaker
And the other than Shopkirana, like the some prominent investments or portfolios we have in India includes Captain Fresh, which is the B2B supply chain again in seafood space. Also Yuru, a B2E sharing company.
00:18:22
Speaker
and ram which is the insurance and group, insurance brokerage companies, and then many more actually emerging from our properties. So yeah, I mean... And all of these are that well, right? Plum, Captain Fresh, they are all success stories. Yeah, I mean, Captain Fresh is doing really well. I think they are leading to 600 million plus revenue and then the leading profitability also.
00:18:49
Speaker
um Amazing. Within 4.5 years or so from the inception, right? So it's doing phenomenally well. Even Euro, you can see the two leaders everywhere in Bangalore, Mumbai, right? So they also, I think number one EV two-wheeler sharing company in india Vietnam. and All of them, we wrote the first VC check. So yeah, I mean, we're kind of proud of it. Yeah.
00:19:13
Speaker
How do you do outsourcing? How do you find these opportunities? And especially when you don't have a network in India and you're like someone who's grown up in India will have a network and will be easier for them. So how did you manage? yeah ah When we started in India in 2016, until maybe 2019-2020 timelines, technically I was alone. So even no associates, no partners, I'm mal alone in India and in doing everything. right so
00:19:45
Speaker
First, so my initial approach is the, as you mentioned, like I have no network. I knew no one in the market. So first six months, actually, I was actually first one year, the, I have been meeting with technically everyone who contacted me. And they also I was like the trying to meet as many people in the industry as possible, including founders, investors, even lawyers, accountants, anyone in the ecosystem. right so And then I just actually calculated how many people I met in first one year time horizon, and then actually more than 2,500 people I met in person in India. wow
00:20:24
Speaker
and then is That, that one you're like, I even like some cases I received a pitch deck from founders and then the the if I lead it skim through it and I felt I could maybe this company would not do well, but I still I was meeting with them because I want to have some, the sense of the quality of the founders was defined the good founders and average founders. Also so like the valuation expectation in India, all of these things is different from Japan and the US. right So I wanted to make sense ah in my mind about the how India is moving from the founder quality to valuation way of thinking about the variations to the each VCs or capitalist houses thinking. So I tried to meet
00:21:10
Speaker
no screening, whoever I contacted or whoever contacted me, I was trying to meet everyone in person. And then afterwards, like the after like meeting two thousand plus people, like the I know someone in the industry and then they gradually some people ah started helping me. And then, oh, some London crazy Japanese is doing something. great Yeah. And then, OK, I'm happy to support you. And then these two or three people start connecting me with the right person in the industry. and then then again this person will introduce me to someone else and then my network suddenly becoming very strong. So first four years or so I was just sourcing from my own network or obviously using some traction and other database also to reach out to the founders obviously.
Focus Sectors and Strategic Funds
00:21:55
Speaker
But the this is how I have been doing and I'm also still keep doing this also.
00:22:00
Speaker
But after 2020, when Laji Branka, who is the now the partner of our fund, Investing Mumbai, okay he joined. And he brought his own network, like he's IIT Mumbai graduate and have been in industry for a few years, even at the time, now 10 years plus of the experience in this industry. So he has a lot of connection to the investors, founders and these communities. So he brought his own network.
00:22:24
Speaker
And then now we are using both of my network and his network. And also now we have a two associates under Rajeev. So they are just going out to the events everywhere almost every day and then try to to source up. So yeah, this is how we do. But the interface, I was alone. So yeah, I was just randomly meeting people and then sourcing. Amazing, amazing, amazing. What is the investment thesis for the fund? Like what kind of, yeah.
00:22:52
Speaker
Yeah, yeah, yeah. So the very fundamental or most important policy we have is the we invested the preceding seed stage as the first VC of the startup. And then the seed round, we lead the round. So this is a very basic principle. So first VC round, lead position investment is the always our success. Obviously, some exceptions, but the 80% plus of the our investment is always leading the seed round.
00:23:21
Speaker
And then we are a sector agnostic in nature. So technically anything we can invest if we like, but obviously it's some bio company and these, I cannot understand what's going on. And then the maybe we cannot explain it twice as obviously we cannot, but the anything we can understand anything we like, we can invest.
00:23:39
Speaker
But currently, we are focusing on the some sectors. um the We have been doing good in B2B supply chain. ah India, domestic, cross-border. So, like, Captain Fresh, Kirlana, and then couple more also coming in. So, we're still British about the supply chain companies in India. So, we are keep looking at these supply chain, B2B supply chain companies.
00:24:04
Speaker
And then also recently D2C brands. We're also now progressing again. Like Yeah, but that Plum is different from actually. Sorry, yeah. For Plum, it's an insurance company. but Yeah, but that Plum, yeah. Yeah, for the... Yeah, we recently invested in a Plum D2C company from our new fund.
00:24:27
Speaker
and yeah And also FinTech, obviously, still we feel there's so many opportunities around FinTech. And then especially we have that growth stage FinTech focus fund together with SMBC. So we can support from the that budget also if the campaign doing well also. right So some synergies between there. So FinTech also. so And then we haven't been focusing on any deep tech, space tech type of companies before. But from this new fund, we finally start investing in these deep tech, space tech type of companies. So this will be a new theme. And then another one is a green tech. So all the EVs or the carbon neutral related and all of these things. Technically, it's a lot actually, but these four or five sectors we are currently focusing on.
00:25:19
Speaker
Okay, okay. The s SPMC FinTech fund, the yeah growth fund, what is the thesis there? ah It's ah anything fintech in Asia, but technically it's a corporate venture capital fund. So it's a 200 million fund, ah yeah only single LP. So SMBC is a single LP and and we are the GP of the fund. So we have to have some collaboration angle with the SMBC as a global banking group or there
00:25:51
Speaker
um franchisee operations in each regions in Asia, including India. In India, they own the SMICC, which is the one of the prominent the NBFC in India. So if we can invest in the FinTech from that fund, ah is there any collaboration opportunity with the SMBC or SMICC in India?
00:26:12
Speaker
or any other countries or franchises in Asia. So some collaboration opportunity will be a must to help actually. It doesn't have to be collaboration from tomorrow. It can be the future potential collaboration after two three years. It's fine, but there's no collaboration, no investment basically.
Importance of Founder Quality
00:26:30
Speaker
so But other than that, it it's no boundaries. So we can invest any print tech from lending to payment to banking tech to anything. yeah okay okay Okay, interesting. interesting ah you know what What have been wrong bets that you have taken where you thought that this would be a good investment but ah your thesis was wrong and you learned something from that?
00:26:55
Speaker
Like, I'm just trying to take out those learnings, you know? Yeah. And you don't have to give me specific names, but... Yeah, yeah, yeah, of course, of course. the One of the learnings the I personally have been taking from my journey for like less seven, eight years of the investment in India. as the In India, especially for the seed fund, the founder quality is everything. I mean, this, I mean, by the way, everybody tell this, of course, even in Japan. Or in any small companies, or also, if I say recover or seed investment, founder is everything. That's true, but especially this is especially important in India, ah even compared to Japan. The the reason is the the
00:27:39
Speaker
in the obviously a large market, more entrepreneurs. and It means that if there's a good opportunities, maybe 10 other companies or founders are doing their very similar things in the market. like and Then, the unfortunately, in your point of view, if the series funding doesn't happen, led by the top tier funds, let's say, the success ratio will be suddenly going very low, right? So if that means the series of funding led by the top tier funds should be secured. And then is this founders or founding team can be good enough to reach there? It's fundamentally most important thing about the, I mean, I didn't understand this point i actually initial phase of our investment, right? Let's say in Japan, if there's a good opportunities and even
00:28:32
Speaker
Obviously bad bad founders cannot do anything, but the let's say above average founders starting something in the good market, it is a good business model. Maybe they will get one or two competitors only and that they can just go in for the mid-sized IP hole in mean the few time few years time horizons. so and a more business model driven, market driven approach we have been taking and then it works. But in India, obviously this is also important, light market, light business model and this stuff. But the more than that, the founding team should be super top notch.
00:29:06
Speaker
And then then these business models and the market is coming next. So this is the biggest learning I have. like In Japan, it's opposite actually. But in India, if the founding group is very strong enough or the founder is strong enough, the business model can change in the future. Like Yuru, right? When we invested in, there's no EV concept in Yuru.
00:29:27
Speaker
they are doing the bicycle sharing and then after six, seven months they changed completely into yeah they completely changed it into the So founders are strong enough to realize that the things and then they change the people that the business model. right Even Captain Fresh, the the when we invested in zero I cannot say zero vision, but almost zero vision about the global expansion. there When we invested in their business domestic company, they are trying to build this infrastructure in India only, but now 90% of the revenues are coming outside um coming from outside India. So they took their ball back to go global.
00:30:05
Speaker
so But founders are strong enough to realize the situations and opportunities and business model will change. But did this founder quality, we cannot replace the CEO at the city zero. So we cannot do that. So this quality of the founder should be outstanding.
00:30:20
Speaker
This is very, very important in the large market like India. It was the biggest running I had. And then couple of bets, we felt like the market is correct and the business model was correct. But the founder was, I cannot say, the the strong enough. And then the competitor got the CZ funding much earlier than them. And then they struggled to raise. And then the unfortunately, they shut down or they needed to be acquired by somebody else. These things happened.
00:30:49
Speaker
Yeah, but this is, so that's why now we are, our internally, the most important factors for us to decide investment is actually the quality of the founders now. Yeah. What's the, do you have a checklist, quality of founder, like say, education pedigree, or how do you judge? Yeah, can you and Yeah, there are a lot of checkpoints. Actually, there are a lot of checkpoints. The founder's pedigree also, also like the the which college they got educated, and then the what kind of grades they have, and all of these things also we check. And then also the the educational, I mean the working experience also, especially with the B2B companies, he should have, or she should have the very strong
00:31:37
Speaker
working experience in the relevant field. And then the also some execution experience we want. is So someone who build a business, ideally having a P&L responsibilities in building some business. even under the large corporations. So it's he or she knows how to build the business also, right? So all of these things we check and also found a reference from the VC Ecosystems or the other founders or their ex-employees and all of these things we check.
00:32:09
Speaker
And then the in detailing out there, maybe like 20, 30 checkpoints, but yeah, I mean, mainly we will check all of these points, yeah, and then decide. Also, all
Growth and Future Planning
00:32:18
Speaker
the IC members, plus even including our associates, should say, yes, this is out to funding founders, otherwise we will not bring it to the IC. Okay. The IC sits in Japan? Currently, we shifted the funding to Singapore, so IC is sitting in Singapore.
00:32:37
Speaker
Okay. Okay. Okay. Okay. And so, you know, what is your, so for you, what is your growth path in, in this, and like, you know, how does a VC grow? Like, do you grow as ah like you manage bigger and bigger front sizes or what, what, what is your growth path going to look like?
00:33:01
Speaker
Yeah. So yeah, I think the it was very fast, ah seven, eight years. But I feel like I haven't grown for sure. um Now I have the much deeper understanding about the Indian market. And then also now we have a team. the the Seven years back, I was alone and doing everything by myself. But you now um we have the team, right? the the laib and then two associates. Even we have a co-optive team also in India, in Bangalore. So this feels this makes me very happy. the Now we have a team and the team is expanding. And then also it makes me changing my load a little bit also. It used to be I'm doing everything from sourcing to execution to body up all the portfolios to everything. they But the 200 is also of our own fund itself.
Exit Strategies in India
00:33:54
Speaker
But now we have a team, so on-ground work, like in especially with the sourcing of the deals, we can let the our on-ground team under Rajeev, maybe 70-80% of this workload we can, because I'm working with Rajeev for more than a few years now, so I trust him. And I want him to lead the, in the future, I want him to lead the entire Indian operations over the point. So in the sense like,
00:34:19
Speaker
Now I feel like the my law is a little bit shifting for building the the strong team and then also focusing more on the fund layers of the our own fund to make it bigger and then also the entire fund strategy for next 10 to 20 years what kind of fund we should do and then which region we should invest and then shall we do the gross fund also sector agnostic gross fund also or not and all of this the strategy for as an incubate fund agent where we go. So now I feel like the I'm upgraded also, and the team was upgraded, and then we are now in the very pivotal moment for the future of our operations in India plus Southeast Asia, ah where we go. But three yeah it's also equally exciting, right? So it's an exciting moment for us, yeah. Okay, okay. ah What do you think, the you know, in terms of
00:35:12
Speaker
exits for investors. How do you think that will work in India? Because that has been one complaint for foreign investors, for investment startups in India, that the exits are not there. ah So yeah but how do you see that getting solved? What do you think the trend is going to be there?
00:35:30
Speaker
Right, so when we started in 2016, obviously that was the most common ask question from our potential rupees also, right how we want to exit, no exit market in India. and But now you can see right the how many startups are doing IPOs and then after 2021, after Tomato's IPO, are now so many good companies, good startups are doing the IPO. So now we can think about the IPO as the potential exit channels even in their local marketplace. So this is a big, big change compared to the 2016 to now, right? So it means like we can make the
00:36:10
Speaker
good growing profitable company if we can make, the we can think about IPOs. So this is a big change. So now we can tell the Indian IPO stories to their peers and also we can even like among our portfolios couple of companies start thinking seriously about the IPO of the company, right? So this is a big change and then this is a very encouraging change also.
00:36:32
Speaker
And obviously, they always M&A opportunities are there ah like the from the global companies or the Indian local also. so But this happens occasionally. right So we cannot plan it from day one. so But if there's a good opportunity for the M&A coming in, we will consider. And we are very early stage investor at the pre-seed to seed stage. We typically invest variation somewhere between 5 million to 10 million. right So it's very, very early stage investment we make.
00:37:00
Speaker
For us, typically 500k to 1 million. We are trying to take 10% plus of the stake of the company. right So, and the for us, the even at the 3C stage, if the secondary options are coming in, if we can sell that still we can make maybe 5 to 10 of the return if the valuation is just 100 million plus. So we're always thinking about the secondary exit to the other BCS or PV funds also. And also even small acquisition, let's say, which would not be covered by media maybe, type like maybe 20, 30 million small acquisition by the someone. Still, we can at least recover our principal money
00:37:44
Speaker
already maybe we can still make 2x, 2x of the return, a cash return also. So we have done a 7x already in India and all of them actually cash acquisition by the local and then global ah companies. And there no acquisition deals, we lost money actually, we recovered all the cash. ah So 1x or yeah or like the small returns we're making. So in a sense like we're always keen to invest at the low variations. It means that even the we have a much for exit venues. If the successful one or two companies from each one will aim for the IPO and then we can make 100 times 100 x returns and some of them will be acquired in the middle.
00:38:24
Speaker
and the even the area stage, secondary or M&A, we can still make some returns. So we're just mixing up all of these things and try to make the entire portfolio anti port trilio to be very profitable.
Advice for Indian Founders
00:38:36
Speaker
okay flags i hope in yeah ah but and just ah does the So when you say you want to have a balanced portfolio, does that influence your choice of companies to invest in? Like you would not invest in a company because it doesn't match with the portfolio or it is just fundamentally company alone.
00:38:59
Speaker
Yeah, company alone, always. but I mean, we don't think about, okay, this company may be making only two X returns for us, and and we we don't invest, right? We're always looking for the NEs company to be 100X return making. It means the at least unicorn potential. So 100 million plus revenue within a few years' time horizon, this company can make it turn out. It's always the, we are thinking. So, yeah, I mean, it's completely each company's alone, we are thinking. Okay, interesting.
00:39:29
Speaker
So let me end with this. What's your advice to founders who are building in India and especially you know from the lens of Japan and how they should think about Japan and in Cuba both?
00:39:42
Speaker
ye Yeah, I mean, the the India and now is um one of the most brightest moments for Indian founders, I think. The Indian economy is growing and then it's stable. And they're also all the global investors are also looking at India. right So it's a right time to start something new if you have something interesting.
00:40:03
Speaker
So I'm very happy to hear any ideas to us. So please start up and then they work together. Here's the message from us. And then the the now from the Japanese investors perspective, right, the the even As a Japanese fan, we are always raising funds from Japan. The first couple of years of but the operation for us, it was very difficult to convince Japanese corporates or investors to to s think about Indian stories. right oh India is a very difficult market, very far away from Japan. All of these excuses are coming to us.
00:40:39
Speaker
But the last six months to 10 months, the suddenly this situation changed. So like every single day, all the major medias in Japan is talking about the Indian economy, Indian startups, all of these things. And then the number of contacts reaching out to me from the Japanese medias, and this is also suddenly increased. So now many corporates, many investors are looking at in Indian startups.
00:41:03
Speaker
for investment and collaboration both. So I think now it's a right time for you guys to contact the the Japanese companies or investors. And then if you need our help, we are happy to support. So anytime, please contact me or our team. Okay, amazing. Thank you so much for your time now, sir. Thank you so much.